(Adds comment from Derek Galanis’ lawyer, NEW YORK dateline)
By Jonathan Stempel
NEW YORK, Feb 16 (Reuters) - Two members of a family conspiracy to manipulate the stock of reinsurer Gerova Financial Group Ltd were sentenced to six years in prison on Thursday, a day after the scheme’s main architect received a more than 11-year term, prosecutors said.
John Galanis, 73, and his son Derek, 44, were also ordered by U.S. District Judge Kevin Castel in Manhattan to forfeit $19.04 million and serve three years of supervised release.
Both defendants pleaded guilty last summer to securities fraud and conspiracy charges.
The sentencings came after Jason Galanis, a former Los Angeles investment banker once dubbed “Porn’s New King,” was sentenced to 135 months in prison by Castel on Wednesday. Jason is John’s son and an older brother of Derek.
David Touger, a lawyer for John Galanis, said: “The court came to a very just and well thought out sentence.”
Anthony Brass, a lawyer for Derek Galanis, said he was pleased his client received less time than his brother, but disappointed he got as much as father “because his involvement was much less. As Judge Castel pointed out, Derek was much more of an employee in the scheme than a manager.”
Prosecutors said the scheme ran from 2009 to 2011, involving a plan to quietly take control of nearly half of Gerova’s public float, and cash out profitably after bribing investment advisers to buy shares for their own clients, driving up the stock price.
The scheme was aided by Gerova’s then-chairman Gary Hirst, and led to nearly $20 million of illegal profits, prosecutors said. Charges were announced in September 2015.
“John and Derek Galanis conspired to have more than $70 million worth of stock issued, hiding Jason Galanis’ control of those shares, so that they could cash out at the expense of unwitting victim investors,” U.S. Attorney Preet Bharara said in a statement.
Hirst was convicted on fraud and conspiracy charges, and faces a March 17 sentencing. Jared Galanis, a brother of Jason and Derek, was sentenced last month to 150 days in prison for his role. Another defendant, Ymer Shahini, is at large.
Jason Galanis was nicknamed “Porn’s New King” by Forbes magazine in 2004 after he bought the largest U.S. processor of credit card payments for internet pornography.
In a separate criminal case, he has pleaded guilty, but not yet been sentenced, over what prosecutors called a roughly $60 million scam to steal proceeds of a bond issue by an affiliate of South Dakota’s Oglala Sioux Nation.
The Gerova case is U.S. v. Galanis et al, U.S. District Court, Southern District of New York, No. 15-cr-00643. (Reporting by Jonathan Stempel in New York; Editing by Tom Brown)